Crypto legislation, tax rules tested in APAC region

Japan’s first so-called compliant stablecoin and revisions to crypto taxation rules in India and Indonesia are testing cryptocurrencies and digital assets legislation across the Asia-Pacific (APAC) region.

For example, Japanʼs first-ever yen-denominated stablecoin, JPYC — from fintech startup JPYC and backed by US-based stablecoin giant Circle — is awaiting regulatory approval, according to its pitch presentation. The stablecoin will operate on a permissionless public blockchain, with plans to expand its use to payments for non-fungible tokens (NFTs) and other real-world assets.

JPYC is expected to gain approval by Japan’s Financial Services Agency (FSA) as early as this autumn, according to Nikkei Asia.

Currently, the country primarily addresses stablecoins through amendments to the Payment Services Act (PSA) published in 2023, which distinguish between two types of stablecoins: digital money-type (fiat-backed and used for payments) and crypto asset-type (algorithmic or asset-linked).

The amendments also stated that permission to issue stablecoins will only be granted to “licensed banks, fund transfer agents and trust companies”, according to law firm Clifford Chance.

In its pitch presentation, JPYC said it has already acquired a prepaid payment instrument (PPI) for third-party licensing, required for financial service products such as e‑money applications, prepaid cards or stored-value contactless.

However, the firm said it must also have a funds transfer service provider licence for the stablecoin to be redeemable in yen, and an exchange service provider licence for its exchangeability with other currencies.

More crypto, more tax

While developments in the crypto sector are progressing, retail investors are facing headwinds as Indian and Indonesian authorities change their approaches to cryptocurrency taxation.

On August 18, India’s Central Board of Direct Taxes (CBDT) reportedly contacted crypto platforms and industry players for feedback on taxation rules, particularly on offshore digital assets markets, according to local news outlets.

The consultation seeks data on how much trading volume has moved overseas since the tax was introduced in 2022, said CCN.

India’s crypto tax regime came into effect in April 2022, imposing a flat 30% tax on profits from the sale, transfer or use of “virtual digital assets”, regardless of the holding period. Losses from crypto transactions were also not permitted to be offset against gains.

Meanwhile, earlier this month Indonesia’s Ministry of Finance (MoF) announced a new tax regime for crypto trading transactions, introducing final income tax of 0.21%, up from 0.1% previously. The regime will apply to anyone buying and selling crypto assets using fiat currency, cryptocurrency exchanges and e-wallets.

However, buyers will no longer be subject to value added tax (VAT), which previously ranged from 0.11% to 0.22%.

“[This regime] establish a comprehensive system that incorporates crypto taxation into the broader fiscal structure, while allowing for flexibility to accommodate the evolving nature of digital assets,” said law firm SSEK in a statement.